BT : Oversupply of homes in Dubai to pressure prices

Business Times - 11 May 2010

Oversupply of homes in Dubai to pressure prices

(DUBAI) The completion of a 'significant' number of new homes in Dubai later this year will further pressure prices that rose 2 per cent in the first quarter, Colliers International said.

Colliers, a global real-estate-services firm, estimates that 41,000 residential units will enter the market by the end of 2010, mostly in the low- to mid-income segments. House prices in the first quarter were on par with 2007 levels, rising on average to 1,061 dirhams (S$398.8) a square foot from 1,037 dirhams a year earlier, Colliers said in an e-mailed report on Sunday.

'There will be significant oversupply in the market by the end of the year, so it is anticipated the index will experience fluctuations in value going forward,' Colliers' regional director Ian Albert said in the report. 'Demand is not expected to match the growth in supply, creating downward pressure on property prices,' according to the document.

Dubai's property prices have slumped more than 50 per cent since their peak in mid-2008 as the financial crisis forced companies to dismiss workers. The market's collapse followed a construction boom that created thousands of homes just as demand began to evaporate.

Apartment prices in the emirate gained 6 per cent in the first quarter compared with the previous three months and villa prices rose 2 per cent while the cost of townhouses was down 4 per cent, Colliers' house-price index showed.

'Numerous' banks and mortgage providers increased the loan-to-value ratio to between 75 per cent and 90 per cent in the first quarter, according to Colliers. Some also lowered interest rates on mortgages to between 6.5 per cent and 8.5 per cent\. \-- Bloomberg

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